Govt, confidence biggest business concerns

The minority federal government, weak consumer confidence and the carbon tax are the biggest economic challenges, a survey of business leaders finds.

The Directors Sentiment Index, prepared for the Australian Institute of Company Directors (AICD), found nearly half the 523 directors surveyed listed the parliamentary balance of power and poor consumer sentiment among their top three economic challenges during the next 12 months.

This was a substantial increase in concern about the issue since the first half of the year.

The carbon tax just pipped the skilled labour shortage as the third most-cited issue of concern, while low infrastructure spending rounded out the top five.

AICD chief executive John Colvin said the index's findings showed the minority government was not maintaining the confidence of the electorate and that the business community was disillusioned.

"The Directors Sentiment Index has also highlighted company directors' belief that there is currently an acute lack of meaningful consultation by the federal government - more than 80 per cent of directors surveyed said that the government lacks an understanding of business," Mr Colvin said.

Optimism among the business community is predictably low, with the global economy hammered this year by the effects of the Japanese tsunami and ongoing European financial turmoil.

The index for the second half of 2011, based on surveys done in August, revealed the outlook among directors for the year ahead had declined since the first survey in March.

Nearly 60 per cent of directors surveyed believed the Australian economy would be weaker in the year ahead, a substantial drop in sentiment compared to the first half of the year.

The survey found 50 per cent of directors said they believed the Reserve Bank would lower rates in the year ahead, while just 15 per cent expected a rate rise.

About 90 per cent of directors said the government was not spending enough on infrastructure.

Telecommunications was the third greatest priority, after water infrastructure and roads, yet 55 per cent said the $36 billion National Broadband Network was not a positive for Australia.